A trial for NFT fraud
Clampdown on Rug Pulls
The U.S Department of Justice (DOJ) has filed charges against six people, accusing them of crypto fraud, including Ponzi, commodities, unregistered securities, and rug pull schemes. Four separate scam cases amount to over $130 million in losses. It’s the second time the watchdog cracks down on the rug pull organizers. OneArt spells out the case in a nutshell and explains why it may have a great impact on the industry.
What’s a rug pull?
It’s a type of fraud. The project developers gather investors’ funds and disappear, leaving the users to calculate losses. Usually, this scheme flourishes on DEXs with free minting and no audit procedures.
The most interesting case: Baller Ape Club
It’s one more NFT project that cashed in on the hype around the apes.
The scammers raised $2.6 million on the mint, stole the money from investors, and deleted the website and social media. Soon after the fraud, the team orchestrated “chain-hopping,” converting coins to another type and moving funds across various blockchains to launder the money.
Founder of the Baller Ape Club, Le Anh Tuan, a Vietnamese, may spend up to 40 years in jail if found guilty.
Why do we care?
There’re two points to keep in mind:
- The story’s not over. BAC’s JPEGs were given away, and now they’re traded on SolSea. However, the platform warns the buyers of unverified NFTs and asks them to check everything before purchasing.
- Investors have the main “commodity” ➡️ it’s difficult to prove the fraud took place at the mint stage. Thus, the sentence depends on how the court interprets the rug pullers’ actions. And since the U.S. court places great weight on precedents, this case is highly likely to determine the future of the American NFT market.